For the first time in years, it’s a buyer’s market. While not as hard hit as the residential and commercial real estate markets, apartment complexes are not immune to the current economic slump. If you’ve been toying with the idea of multifamily real estate investment, now is a great time to get your foot in the door. Like any major financial commitment, buying an apartment complex requires careful investigation of the potential investment and adequate planning to maintain its value.
Evaluating Your Investment
Location, location, location!
Just like purchasing your own home, location is a vital factor in evaluating the value of an apartment complex. If people spend a good percentage of their monthly income on rent, they will want the best they can afford. Proximity to major employment hubs, quality of the local schools and general appeal of the area are all features potential residents take into account before they even walk in the door.
There can be no better location than the area that has most of the basic amenities that are required like schools, toilet system, departmental stores, etc. to name a few. The location of any apartment depends on the fact on how you want it because it is entirely based on your preference and what is the fee structure of the area where it is located and so on. The Parc Central Residences price is quite high but if you are looking for one that has major hubs in the vicinity, it is the right choice for you.
Can you foresee potential tenant issues?
Late rent payments and eviction notices may not be disclosed upon casual inquiry, but you can often get an idea of any potential tenant issues by simply walking around the property. Quality tenants care about where they live and how it’s maintained. Trash in the carports, balconies used as storage spaces and music blaring throughout the complex can be indicative of the residents. Income isn’t a barometer for tenant quality, but consider the financial qualifications for renting. If you intend to significantly raise rents within the next year or two, you may be faced with a large number of vacancies to fill if the complex currently requires a gross monthly income less than 2.5 times the monthly rent.
Assess the condition of the property.
In walking around the property, observe the buildings themselves. A property built before the 1990s will likely need some renovation to upgrade its appeal, but if you are considering an apartment complex with a price tag that seems like it’s too good to be true then take an objective step back. There may be issues that could drain more out of your pocket than you get out of the property.
Consider its amenities.
The more amenities an apartment complex offers, the more appealing it becomes to potential residents. Parking, paid utilities, laundry facilities and whether or not an apartment complex boasts a pool are arguably the most attractive amenities for future residents. Determine, though, if you want added responsibilities like pool maintenance.
Overall, when you consider purchasing an apartment complex, view it as if you were a prospective resident. Would you want to live at this apartment complex versus the one with comparable rent located two streets down? If the answer is yes, then the property is worth investigating further.
Protecting Your Investment
Review the property and its financials in careful detail!
Evaluating the value of a property doesn’t end with a stroll about the complex. If you’ve finally chosen to invest in an apartment complex, then the real work begins! Review the property’s financial documents, including rents for each unit. Hire an inspector to delve into possible issues with mold, building code violations, drainage problems and anything else that may prove a liability to you as the new owner.
Investigate your financing and be realistic about your returns.
Though some good deals are available for apartment complexes, financing may still be difficult in the current economy. Once you’ve determined to purchase an apartment complex, be sure to review all your options because it may be a few years before you see returns to get excited about. Improvements will likely need to be made once the purchase is finalized and few markets right now can tolerate major rent increases.
Find a reputable real estate attorney.
For the rookie investor, an attorney may seem like an unnecessary precaution. However, no matter how diligently you screen potential residents or how ideal the current residents may seem, things happen. Eviction can be a nasty, drawn-out process, but with an experienced attorney things can go much more smoothly. Legal counsel can also help you deal with contractors should any issues arise.
Property management companies can take a load off your shoulders.
For some apartment complexes with 12 or more units, managing the property and dealing with tenant issues can be a full time career. If you are seeking to invest but aren’t interested in unclogging toilets or the fine print in your local fair housing laws, then try partnering with a property management company. They are fully staffed with personnel who know the minutia of operating a successful property.
Buying an apartment complex can be overwhelming for a first-time real estate investor, but it’s an investment that, if clearly considered and well-managed, pays handsomely in the long run. After all, people need to live somewhere!